Nikkei 225, ASX 200, Hang Seng Index Brace for Volatility After More Wall Street Rout

Nikkei 225, ASX 200, Hang Seng Index, S&P 500, US CPI, Technical Analysis – Asia Pacific Indices Briefing

  • Hotter-than-expected US inflation data continues to pressure Wall Street
  • Lackluster Asia-Pacific economic data highlights risk trends
  • Nikkei 225, ASX 200 and Hang Seng Index prepare for more volatility?

Recap of Wall Street Wednesday’s trading session

Volatility on Wall Street continued to beat major equity benchmarks on Wednesday, putting the Nikkei 225, ASX 200 and Hang Seng in jeopardy next. Looking at the chart below, the majority of the S&P 500 sectors closed in the red. The 3 worst performing components were Consumer Discretionary, Information Technology and Communication Services, down 3.57%, 3.3% and 1.51% respectively.

The main culprit was another hotter-than-expected inflation report from the US. Headline CPI broke through to 8.3% y/y in April, from 8.5% in March. Still, that was much stronger than the 8.1% consensus. The core measure, which excludes volatile food and energy prices, also surprised on the upside. It reached 6.2% year-on-year against 6.0% seen, against 6.5% previously.

This will continue to keep the Federal Reserve on its toes as it attempts to bring inflation back towards the long-term average target of 2.0%. Additionally, markets raised their expectations for a fourth 50 basis point hike this year. Meanwhile, the central bank is about to start unwind its balance sheetfurther reducing liquidity conditions in financial markets.

Sector allocation of the S&P 500 11/05/2022

Data source: Bloomberg

Thursday’s Asia-Pacific trading session

Thursday’s Asia-Pacific trading session appears to be fairly light on data. Australia will publish consumer inflation expectations. This could keep traders glued to broader fundamental themes and focus on general market sentiment. As such, this could be another disappointing round for indices such as the Nikkei 225, ASX 200 and Hang Seng Index as investors around the world continue to grapple with the reality of tighter trading conditions. credit.

Nikkei 225 Technical Analysis

The Nikkei 225 confirmed a break below the 38.2% Fibonacci extension at 26103, exposing the midpoint at 25377 before the March low at 24505 comes into focus. The decline in the index appears to be a combination of a long-term downtrend line from September and a short-term line from late March. These could re-establish the downward direction in the event of an upward turn.

Nikkei 225 Daily Chart

Nikkei 225, ASX 200, Hang Seng Index Brace for Volatility After More Wall Street Rout

Chart created in TradingView

ASX 200 Technical Analysis

The ASX 200 has struggled to maintain a push below the 100% Fibonacci extension at 7007. Recently, prices have left behind a Long Legged Doji Candlestick. It is a sign of indecision. Upward progress could signal further gains to come. Still, the downside clearing exposes the wide 6747 – 6894 support zone before the March 2021 low draws closer. In case of an upside reversal, keep a close eye on the April downtrend line.

ASX 200 daily chart

Nikkei 225, ASX 200, Hang Seng Index Brace for Volatility After More Wall Street Rout

Chart created in TradingView

Hang Seng Technical Analysis

The Hang Seng Index is trying to sustain a push below the April low at 19625, with immediate support below as the midpoint of the Fibonacci extension at 18980. Below that is the March low. which is closely aligned with the 2016 low at 18037. In the event of an upside reversal, the February downtrend line could maintain a dominant focus on the downside.

Hang Seng Futures Daily Chart

Nikkei 225, ASX 200, Hang Seng Index Brace for Volatility After More Wall Street Rout

Chart created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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